Asset & Liability Management for Insurance Companies

Hours: 58 / Access Length: 3 Months / Delivery: Open, Mentor Supported
Retail Price: $600.00

Course Overview:

The program has been designed to discuss concepts and case studies on Asset Liability Management for the insurance industry. The course discusses and reviews ALM concepts such as cash flows and risks of insurance products (assets and liabilities), applicable regulatory and capital guidelines, actual case studies and current trends and developments. The course has been designed to be conceptually sound and practical.

Learning Objectives:

• Benchmark your institution by examining ALM success factors
• Understand key performance indicators for ALM and Risk Management
• Gain practical insights into how leading institutions are utilizing ALM for value creation
• Examine how cash flows and risks of insurance products affect ALM
• Discuss the global best practices in ALM followed by insurance companies worldwide
• Examine how to provide optimal oversight of the Risk Management function
• Study how to enhance the effectiveness of ALM Committees

Course Outline:

Scope of ALM

• The concept of asset liability management
• The various types of market risks and their implications on the institution
• The short term and the long term risks

Overview of ALM in Insurance Companies

• The concept of asset liability management in insurance companies
• The applications of asset liability management
• The different types of risks in insurance
• The overall approach for managing risks

A 9 Part Framework of ALM

• The purpose and significance of ALM framework
• In detail the nine-components of ALM framework
• The role, relevance and application of the framework

Strategies for ALM

• The various types of strategies in ALM process
• The difference between the various strategies that can be used on the basis of parameters such as speed, flexibility, costs and risk involved

Overview of Life and Property and Casualty Industry

• The different types of insurance companies
• The players in the insurance market place
• The functions of insurance
• The background and the type of life and property and casualty insurance products
• The global landscape and the changing face of the insurance industry

Annuities

• The concept of annuities
• The importance of annuities
• The different types of annuities
• The concept, features and applications of Equity Indexed Annuities
• The indexing methodologies employed

Actuarial Principles

• The role played by an actuary in the insurance industry and the nature of actuarial practice
• The distinction between the principles and standards used in the actuarial profession
• The principles of actuarial science based on probability and statistics, behavioral economics, actuarial models and financial security systems

Reinsurance

• The concept of reinsurance and the need for it
• The different types and methods of reinsurance
• The alternative risk transfer mechanisms in reinsurance
• The basic functions of reinsurance

Insurance Linked Securitization

• The process of insurance linked securitization
• The concept of insurance loss indices
• The various securitization instruments
• The advantages and disadvantages of insurance linked securitization
• The future of insurance linked securitization

Yield Curve Analysis

• The concept of yield curve and its types
• The various theories under yield curve analysis
• The types of interest rates and its computation
• The applications of yield curve analysis

Interest Rate Gap I

• The concept of gap analysis
• The method of preparation of gap report
• The process of calculating gap, cumulative gap and related measures
• The critical factors that have to be considered while slotting balance sheet items in the gap report
• How to identify the key positions in gap report

Interest Rate Gap II

• The computation of income statement impact of gap
• The process of setting up gap limits
• The various restructuring strategies to be followed if gap is not within limits
• The strengths and limitations of gap analysis

Simulation and Scenario Analysis I

• The concept of simulation
• The process of measuring risk positions or simulating various accounts and setting risk limits
• The distinction between various methods of choosing scenarios for simulation
• The ways of presenting the outcomes of simulation
• The various criteria used for selecting an appropriate business strategy
• How to avoid analysis paralysis
• The components and issues involved in simulation modeling
• The concept of stress testing and backtesting

Simulation and Scenario Analysis II

• The modeling of non-specific maturity items and the factors that affect these items both from the assets and liabilities perspectives
• The techniques for identifying various factors that affect account balances and for analyzing rate sensitivity of core deposits
• The need to align the business plan with various rate scenarios
• The process and steps involved in monte carlo simulation
• The advantages and disadvantages of monte carlo simulation

Duration I

• The concept of duration and modified duration
• The application of formulae for duration and modified duration
• The computation of different types of bonds
• The relationship between duration, yield, coupon, maturity of a bond and thereby comprehend the properties of duration

Duration II

• The computation of duration of perpetual bonds, embedded options and floaters
• The computation of duration of a portfolio
• The application of the concept of duration for off-balance sheet items
• The effects of approximation involved while using modified duration
• The difference between gap and duration
• The strategies of risk management

Duration III

• The calculation of duration of equity
• The designing of hedging strategies to manage the interest rate sensitivity of the balance sheet
• The computation of duration of complex items by using the concept of portfolio replication
• The derivation of the zero coupon yield curve using the present value of cash flows

Convexity

• The concept of convexity and its properties
• The calculation of convexity of different types of bonds
• The computation of convexity of a portfolio
• The impact of price change on convexity
• The concept of positive and negative convexity

Basis Point Value

• The concept of basis point value
• The change in the value of the portfolio due to one basis point change in the interest rates
• The relationship between BPV, duration and modified duration
• The calculation of BPV of on-balance sheet and off-balance sheet items
• The computation of BPV of a portfolio
• The advantages of BPV as a risk control technique

Value at Risk I

• The concept of Value at Risk
• The concept of trading and banking book
• The various methodologies of estimating VaR and their strengths and weakness
• The comparison between the strength and limitation of VaR

Value at Risk II

• The computation of VaR of foreign exchange spot, foreign exchange options positions, common shares/stocks, fixed income portfolio
• The various applications of VaR

Application of Analytical Techniques

• The framework of the analytical techniques - gap, duration, simulation and value at risk
• The concept and assumption under each technique
• The comparison and analysis of each of the techniques across various parameters
• The application of techniques with real life case studies

AL Organization

• The various elements of AL Organization viz., the ALCO, the AL sub-committee, and the ALCO support group
• The scope of ALCO
• The key issues of centralization and decentralization

ALCO Meetings

• The operational aspects of ALCO meetings
• The data requirements of ALCO meetings

ALM Policies and Procedures

• The ALM policy and the procedure manual
• The contents of the ALCO reports

Audit of ALM

• The significance and concept of audit of ALM function
• The overall approach and scope for the function of ALM audit
• In detail the applications of the audit process
• The various types of AL models and examine different scenarios and assumptions involved in the audit

Regulations in Insurance Industry

• The growing relevance of regulation in the insurance industry
• The various measures adopted by insurance regulators
• The capital regulation initiatives undertaken by prominent insurance supervisors
• The future developments in insurance regulations

Software Applications

• The areas of software application in the insurance industry
• The various considerations for choosing a software package
• The working of various software packages for the insurance industry

Case Study - Confederation Life Insurance

• This course discusses the case study of Confederation Life Insurance Company - what actually happened and the lessons learnt

All necessary materials are included.

System Requirements:

• Cable and DSL internet connections are recommended for the best experience.

• CPU: 1 GHz or higher
• RAM: 2 GB or higher
• Resolution: 1280 x 720 or higher
• Speakers / Headphones
• Microphone (Webinar / Live Online sessions)

• Microsoft Windows 7 or 10 (Home, Pro)
• Mac OSX 10 or higher.
• Latest Chrome OS
• Latest Linux Distributions

NOTE: While we understand that our courses can be viewed on Android and iPhone devices, we do not recommend the use of these devices for our courses. The size of these devices do not provide a good learning environment for students taking online or live online based courses.

• Latest Google Chrome is recommended for the best experience.
• Latest Mozilla FireFox
• Latest Microsoft Edge
• Latest Apple Safari

• Office suite software (Microsoft Office, OpenOffice, or LibreOffice)
• PDF reader program (Adobe Reader, FoxIt)
• Courses may require other software that is denoted in the above course outline.